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Wheat growers lock in contracts as prices rise

With wheat prices lifting, growers are locking in forward contracts for the next harvest, even before planting has begun.

ABC TV

Political uncertainty in the Black Sea region and concern over damage in the US winter wheat crop are leading to a surge in global wheat prices.

Chicago wheat futures have jumped 25 per cent in six weeks, and locally, forward prices for the 2014 harvest have added $35 a tonne, to about $300 a tonne.

Luke Matthews, from the Commonwealth Bank, says many growers are making the most of the rally and locking in futures contracts.

"That seems to be a critical level for a lot of growers out there. If prices that they have on offer look around that $300 a tonne mark, they start to lock in some of those prices.

"So we are seeing opportunities here locally, and more broadly it's just helping provide a little bit of confidence to the Australian grain grower in the lead up to the planting season."

But, Mr Matthews says, with parts of Queensland and New South Wales already in drought, and concern among some growers of a possible El Nino, which brings drier conditions, occurring later this year, the weather will be a big factor for Australian wheat production.

"The most important thing that will be required for confidence for the local grain grower will be what falls out of the sky.

"There is still a significant amount of uncertainty about what weather conditions might prevail for 2014."